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Indian cabinet approves ethanol procurement mechanism

In India, the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Shri Narendra Modi has approved the mechanism for procurement of ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Programme and the ethanol price for supply to Public Sector OMCs.

The Ethanol Blended Petrol (EBP) Programme was launched by the government in 2003 on a pilot basis which has been subsequently extended to the Notified 21 States and 4 Union Territories to promote the use of “alternative and environmentally friendly” fuels.

According to a statement by the Ministry of Petroleum & Natural Gas (MoP&NG), this intervention also seeks to reduce import dependency on energy requirements and provide a boost to the agricultural sector.

The CCEA has approved the following for the forthcoming sugar season 2018-19 during ethanol supply period from December 1, 2018, to November 30, 2019:

  • To fix the ex-mill price of ethanol derived out of C heavy molasses to Rs.43.70 per litre up from the current price of Rs.40.85 per litre. Additionally, General Sales Tax (GST) and transportation charges will also be payable.
  • To fix ex-mill price of ethanol derived from B-heavy molasses and sugarcane juice at Rs.47.49 per litre. Additionally, GST and transportation charges will also be payable.
  • As the price of ethanol is based on estimated Fair & Remunerative Price (FRP) for sugar season 2018-19, it will be modified by the Ministry of Petroleum & Natural Gas (MoP&NG) as per actual FRP declared by the government.
  • For ethanol supply year 2019-20, ethanol prices will be modified by MoP&NG as per normative cost of molasses and sugar derived from FRP of sugarcane.

According to MoP&NG, all distilleries will be able to take benefit of the scheme and a large number of them are expected to supply ethanol for the EBP programme. Remunerative price to ethanol suppliers will help in reduction of sugarcane farmer’s arrears, in the process contributing to minimizing the difficulty of sugarcane farmers.

Ethanol availability for EBP Programme is expected to increase significantly due to a higher price for C heavy molasses-based ethanol and enabling procurement of ethanol from B heavy molasses and sugarcane juice for the first time. Increased ethanol blending in petrol has, MoP&NG says, many benefits including reduction in import dependency, support to the agricultural sector, less polluting fuels and additional income to farmers.

The government has notified administered price of ethanol since 2014. According to the MoP&NG, this decision has significantly improved the supply of ethanol during the past four years. The ethanol procured by Public Sector OMCs has increased from 38 crore (380 million) litres in ethanol supply year 2013-14 to estimated 140 crore (1.4 billion) litres in 2017-18.

The sugarcane and sugar production in this sugar season is very high leading to the dampening of sugar prices. Consequently, sugarcane farmers’ dues have increased due to the lower capability of the sugar industry to pay the farmers. As realization from ethanol is also one of the components in revenue of sugar mills and/or distilleries, the government has decided to review the price of ethanol derived out of C heavy molasses.

The government is also deciding the price of B heavy molasses and sugarcane juice for the first time which MoP&NG says is likely to positively impact the capability of the sugar industry to pay farmers dues and increase the availability of ethanol for EBP Programme. This is also in line with the National Policy on Biofuels 2018 announced by the government during May 2018 which has widened the scope of raw material for ethanol production.

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